Here’s How India’s Economy Is Growing Under Modi Government

By Author: Varun Pratap Singh
Total Articles: 40
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Some economic challenges he is still to face include increased sourced debt and fraud allegations for banks, lack of investors for Indian stocks, and bonds and saturated foreign direct investment growth.

In the first three years of Modi’s governance, the foreign direct investment growth of India increased at a healthy rate. His Bhartiya Janata Party (BJP) assumed power in 2014 with the promises of uplifting the poor, eliminating corruption, creating jobs, and regulating price increases. The party only has one year left to deliver on all its promises.

So far, Modi’s rule has accomplished the following:

Gross Domestic Product

Modi introduced a more efficient way of calculating GDP and placed India on the road to replacing China as the fastest growing economy in the world. However, an unexpected cash clampdown hit the country in November 2016. It affected rural India which is home to at least 70 percent of the country’s population. Modi’s government lowered interest rates to help the economy recover. India’s $2.3 trillion economy is expected to improve at the slowest pace in four years.

Trade ...
... Deficit

India loves gold. Combined with the sharp increase in the crude oil prices, India’s trade deficit widened under the BJP. The imports from China have gone up, and India continues to run a trade surplus with the United States. India is, however, currently on the US Treasury’s watch list for currency manipulators despite its trade gap widening.

Current Account Deficit

Modi’s government has done a lot to increase foreign direct investments. India’s economy almost came to a first-time surplus in ten years because of his efforts. Regardless, there is a deficit in the current account status. Based on skewed trade, the gap in India’s economy has started to grow again. As this presents a vulnerability to increased yields from the U.S. the Prime Minister needs to improve the economic output. The current foreign reserves in the country can only last India for ten months.

Fiscal Deficit

Last year’s budget failed to allocate more resources to health care and agriculture as it had promised. Modi’s efforts to bring the fiscal deficit down to a 10-year low won India a rating upgrade from Moody’s Investors Service. Crude oil financed most of Modi’s efforts in the last three years. These prices may now be working against his government, and this leaves Modi with the challenge of narrowing India’s budget deficit even when he is expected to increase spending.

Inflation and Interest Rates

Good rainfall and reasonable oil prices influenced the benign state of retail prices under Modi’s governance. In last year November, consumer price inflation flew over the target. This introduces other risks from oil and government policies to consumer pricing.

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